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Market turmoil tied to ABC news report

'World News' claimed Israeli attack on Iran is possible

NEW YORK -- Early turmoil in financial markets Tuesday was tied to a report on ABC's "World News" that claimed an Israeli attack on Iran is possible by the end of the year.

"The early headlines are all about an ABC News item citing an unidentified Pentagon official as saying that Israel is likely to attack Iran's nuclear facilities this year," a Merrill Lynch economist wrote Tuesday.

The report, by ABC News senior national security correspondent Jonathan Karl, aired on Monday night's "World News With Charles Gibson" and got traction throughout the night on ABCNews.com and the Drudge Report. The unidentified official said that Israel wanted to destroy an Iranian nuclear facility before it created enough highly enriched uranium for a nuclear weapon and before Iran could install a new air-defense system.

That gave the markets a significant hiccup, and an excuse for a further increase in crude oil prices. Crude oil prices rose a few dollars to go above $142 a barrel as investors feared that more armed conflict in the Middle East could stop oil supplies. ABC's story said the U.S. is concerned that Iran if attacked would not only retaliate against Israel but also the U.S.

"World News" anchor Charles Gibson made mention of the brouhaha during a live interview with Karl on Tuesday's "World News."

Speaking after Tuesday night's broadcast, "World News" executive producer Jon Banner said that roiling the oil market was far from ABC's mind when it went with the story.

"Our purpose in reporting what we did is to let the American people hear what senior Defense Department officials think in terms of Iran and possible Israeli military action," Banner said. "That's of significant importance to the American public, regardless of whether it has an impact on oil market prices or not."

Calling Karl's sourcing "first rate," Banner said that the basis of the story is a concern among U.S. officials. He said that the ABC News bureau chief in Jerusalem checked on the story overnight from the Israeli perspective "and his sources were telling him the same thing."

ABC News said it wasn't aware of any pushback or complaints about the story beyond a denial from the state department on Tuesday. Banner said the department "clearly should talk to their colleagues at the Defense Department if they have problems with the story. That story is solid."

Monday's initial report was in the first block but wasn't the lead. A follow-up Tuesday occurred 10 minutes into the broadcast.

Karl said that he had an interview with Iranian foreign minister Manouchehr Mottaki earlier in the day. Mottaki said the chances were "nil" that Israel would attack, Karl told Gibson.

By late morning, the markets seemed to calm down a bit. Iran, Israel and the U.S. all threw water on the claims. Miller Tabak equity strategist Peter Boockvar said that oil and gold prices would have been up further if the markets had believed the ABC report.

NBC devoted airtime to the report -- though not mentioning ABC as the source -- when correspondent Richard Engel did an exclusive interview with Mottaki that appeared on the "NBC Nightly News." In that interview, Mottaki said he didn't believe that Israel was in the position to attack anyone. But he did say that Iran didn't make a distinction between the U.S. and Israel if an attack were to come.

The Dow Jones Industrial Average closed the day up 32 to 11,382 after falling 150 points earlier in the day. Concerns about oil prices were outweighed by better-than-expected earnings by General Motors.